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Consequential loss


A term commonly used in the insurance world where, in addition to compensation for actual goods lost or destroyed, a business wishes to provide against the loss of profit during the period owing the incident, e.g. a fire after which the business was inactive - partly or in whole. Most trading concerns take out what ire called 'consequential loss policies'. The calculation of the amount payable by the insurer will depend on the exact terms of the policy. It will normally be related to the average net profits over a stated past period, plus standing charges and an amount to cover audit fees, architects' fees, etc. The method of calculation is too complex to be described here.

Reference: The Penguin Business Dictionary, 3rd edt.